Bayesian Group Belief

If a group is modelled as a single Bayesian agent, what should its beliefs be? I propose an axiomatic model that connects group beliefs to beliefs of group members, who are themselves modelled as Bayesian agents, possibly with different priors and different information. Group beliefs are proven to take a simple multiplicative form if people''s information is independent, and a more complex form if information overlaps arbitrarily. This shows that group beliefs can incorporate all information spread over the individuals without the individuals having to communicate their (possibly complex and hard-to-describe) private information; communicating prior and posterior beliefs suffices.mathematical economics;

Contagious Synchronization and Endogenous Network Formation in Financial Networks

When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of the world and a social belief formed from observing the actions of peers. Observing a larger group of peers conveys more information and thus leads to a stronger social belief. Extending the standard model of Bayesian updating in social networks, we show that the probability that banks synchronize their investment strategy on a state non-matching action critically depends on the weighting between private and social belief. This effect is alleviated when banks choose their peers endogenously in a network formation process, internalizing the externalities arising from social learning.Comment: 41 pages, 10 figures, Journal of Banking & Finance 201

Why Are There Descriptive Norms? Because We Looked for Them

In this work, we present a mathematical model for the emergence of descriptive norms, where the individual decision problem is formalized with the standard Bayesian belief revision machinery. Previous work on the emergence of descriptive norms has relied on heuristic modeling. In this paper we show that with a Bayesian model we can provide a more general picture of the emergence of norms, which helps to motivate the assumptions made in heuristic models. In our model, the priors formalize the belief that a certain behavior is a regularity. The evidence is provided by other group members’ behavior and the likelihood by their reliability. We implement the model in a series of computer simulations and examine the group-level outcomes. We claim that domain-general belief revision helps explain why we look for regularities in social life in the first place. We argue that it is the disposition to look for regularities and react to them that generates descriptive norms. In our search for rules, we create them

Learning And Decision Making In Groups

Many important real-world decision-making problems involve group interactions among individuals with purely informational interactions. Such situations arise for example in jury deliberations, expert committees, medical diagnoses, etc. We model the purely informational interactions of group members, where they receive private information and act based on that information while also observing other people\u27s beliefs or actions. In the first part of the thesis, we address the computations that a rational (Bayesian) decision-maker should undertake to realize her optimal actions, maximizing her expected utility given all available information at every decision epoch. We use an approach called iterated eliminations of infeasible signals (IEIS) to model the thinking process as well as the calculations of a Bayesian agent in a group decision scenario. Accordingly, as the Bayesian agent attempts to infer the true state of the world from her sequence of observations, she recursively refines her belief about the signals that other players could have observed and beliefs that they would have hold given the assumption that other players are also rational. We show that IEIS algorithm runs in exponential time; however, when the group structure is a partially ordered set the Bayesian calculations simplify and polynomial-time computation of the Bayesian recommendations is possible. We also analyze the computational complexity of the Bayesian belief formation in groups and show that it is NP-hard. We investigate the factors underlying this computational complexity and show how belief calculations simplify in special network structures or cases with strong inherent symmetries. We finally give insights about the statistical efficiency (optimality) of the beliefs and its relations to computational efficiency. In the second part, we propose the no-recall model of inference for heuristic decision-making that is rooted in the Bayes rule but avoids the complexities of rational inference in group interactions. Accordingly to this model, the group members behave rationally at the initiation of their interactions with each other; however, in the ensuing decision epochs, they rely on heuristics that replicate their experiences from the first stage and can be justified as optimal responses to simplified versions of their complex environments. We study the implications of the information structure, together with the properties of the probability distributions, which determine the structure of the so-called ``Bayesian heuristics\u27\u27 that the agents follow in this model. We also analyze the group decision outcomes in two classes of linear action updates and log-linear belief updates and show that many inefficiencies arise in group decisions as a result of repeated interactions between individuals, leading to overconfident beliefs as well as choice-shifts toward extreme actions. Nevertheless, balanced regular structures demonstrate a measure of efficiency in terms of aggregating the initial information of individuals. Finally, we extend this model to a case where agents are exposed to a stream of private data in addition to observing each other\u27s actions and analyze properties of learning and convergence under the no-recall framework

Complexity of Bayesian Belief Exchange over a Network

Many important real-world decision making prob- lems involve group interactions among individuals with purely informational externalities, such situations arise for example in jury deliberations, expert committees, medical diagnosis, etc. In this paper, we will use the framework of iterated eliminations to model the decision problem as well as the thinking process of a Bayesian agent in a group decision/discussion scenario. We model the purely informational interactions of rational agents in a group, where they receive private information and act based upon that information while also observing other people’s beliefs. As the Bayesian agent attempts to infer the true state of the world from her sequence of observations which include her neighbors’ beliefs as well as her own private signal, she recursively refines her belief about the signals that other players could have observed and beliefs that they would have hold given the assumption that other players are also rational. We further analyze the computational complexity of the Bayesian belief formation in groups and show that it is NP -hard. We also investigate the factors underlying this computational complexity and show how belief calculations simplify in special network structures or cases with strong inherent symmetries. We finally give insights about the statistical efficiency (optimality) of the beliefs and its relations to computational efficiency.United States. Army Research Office (grant MURI W911NF-12- 1-0509)National Science Foundation (U.S.). Computing and Communication Foundation (grant CCF 1665252)United States. Department of Defense (ONR grant N00014-17-1-2598)National Science Foundation (U.S.) (grant DMS-1737944

Making Consensus Tractable

We study a model of consensus decision making, in which a finite group of Bayesian agents has to choose between one of two courses of action. Each member of the group has a private and independent signal at his or her disposal, giving some indication as to which action is optimal. To come to a common decision, the participants perform repeated rounds of voting. In each round, each agent casts a vote in favor of one of the two courses of action, reflecting his or her current belief, and observes the votes of the rest. We provide an efficient algorithm for the calculation the agents have to perform, and show that consensus is always reached and that the probability of reaching a wrong decision decays exponentially with the number of agents.Comment: 18 pages. To appear in Transactions on Economics and Computatio